Oil prices fluctuated due to Red Sea and economic worries

After dropping the previous session, oil prices were mixed on Tuesday as investors balanced general economic worries against weather-related supply and demand problems in the United States and ongoing tensions in the Middle East that resulted in additional tanker diversions. At $78.20 a barrel, Brent crude futures increased by 5 cents, or roughly 0.06%. Earlier on Monday, the contract had settled 14 cents lower. U.S. West Texas Intermediate crude was down 20 cents, or 0.28%, at $72.48 per barrel after a U.S. public holiday on Monday.

“At present, the wait-and-see sentiment in the oil market is relatively heavy, with the escalation of geopolitical conflicts offset by the (earlier) accumulation of inventory (in the U.S.),” stated CMC Markets. The spotlight was also on the extremely cold weather in the United States, which analysts said could limit oil production and have an impact on major refinery operations.

The severe cold and associated operational problems have already caused a 400,000–425,000 barrel per day decline in North Dakota’s oil production. In the Middle East, the Houthi movement in Yemen has promised to continue its attacks following American and British raids on its locations in Yemen. An official from the Iran-allied group stated on Monday that the movement will now target American ships in the Red Sea region.

Due to the disturbances, more oil tankers avoided the southern Red Sea on Monday, which raised transportation costs and lengthened the time it took to move oil from one location to another. As a result of the increasing unrest in the region, oil prices increased by 2% last week; however, analysts believe that the gains may be limited because there was no direct impact on oil output.

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